Question

The Blue Plum Company’s Office Supplies account had a beginning balance of $16,000. During the month, purchases of office supplies totaling $4,000 were debited to the Office Supplies account. If $6,000 worth of office supplies is still on hand at month-end, what is the proper adjusting entry?

Select one:

a. A)    Office Supplies                                                         14,000
Office Supplies Expense                                                    14,000

b. A)    Office Supplies Expense                                             6,000
Office Supplies                                                                    6,000

c. A)    Office Supplies Expense                                           14,000
Office Supplies                                                                  14,000

d. A)    Office Supplies                                                           6,000
Office Supplies Expense                                                      6,000

Answer 1

1. What is the Proper Adjusting Entry?

Answer: C. Office Supplies Expense A/C 14,000

    Office Supplies A/C                    14,000

Reason: The Opening Balance of office supplies is 16,000 and in this month a total of 4,000 worth of office supplies have been purchased implying that the total stock will be 20,000. And at the end the month there is a closing stock of 6,000 which means some of the office supplies have been used for that we need pass an adjusting entry. The closing stock is 6,000 implies that a stock of 20,000 - 6,000 = 14,000 have been used. For that we will pass an entry by debiting office supplies expense account & crediting office supplies account by 14,000.